The so-called actual taxation (§ 20 UStG) is a legal exception to the principle of debit taxation and serves, among other things, to avoid burdening smaller companies with the advance financing of VAT.
As a rule, VAT is calculated on the basis of agreed charges (debit taxation, § 16 (1) UStG), i.e. VAT arises at the end of the advance return period (month/quarter) in which the supply or other service was performed. The sales tax must then be declared and paid for this advance return period, regardless of when the invoice is issued or the customer pays. However, if you receive down payments before the service is performed, you must pay tax on them in the advance return period in which they are received.
In the case of actual taxation, the sales tax arises at the end of the advance return period in which the payments were received. In this case, you do not have to declare and pay the sales tax until your customer has actually paid.
Please note that the use of actual taxation is dependent on an application and requires the approval of the tax office. Your application for actual taxation can generally be approved if one of the following conditions is met:
- The total turnover in the previous calendar year must not have exceeded €600,000. (If you have opened a business: the total turnover in the year in which the business was opened must not exceed € 600,000. If you have only carried out the business activity for part of the calendar year, you must extrapolate the turnover achieved into an annual turnover)
- You are exempt from the obligation to keep books and prepare regular financial statements.
- You exercise a freelance activity within the meaning of § 18 EStG and do not keep books either on the basis of a legal obligation or voluntarily.